After Greece bailout and the agreement with Euro zone leaders about the austerity measures and the external supervision on Greece finance, the pressure in the market and Europe in general could breathe relieved. Is that true??? Well partially. For sure the agreement on releasing the bailout is a good news but we need to have at least three important subjects on our mind when thinking about our investment portfolio.
1) The first one is the fact that Greece has only about a week to approve and implement the austerity measures in order to be given the first part of the approved bailout. A fail in meeting this target would clearly shake the market.
2) Banks and financial institutes that had lent money to Greece will receive much less now than previously agreed and it was already noticed by the market in their stock values. Also they may stop paying dividends in a drastic case which would directly affect preferred stocks and/or bonds.
3) for Greece to be able to sustain the austerity measures and to promote growth in the future to their country, they would need the support and commitment of the all population, which is not happened right now (see example of Korea that lived similar situation in the past). So, in summary, even after the bailout, keep Greece in your mind and closely watch their actions, especially during this week, being conservative in your portfolio for investments that may be affected by their crisis.
Greece needs to cut spending, but I have never seen a recovery anywhere without a growing economy. What is the plan to create an economic and investment environment where the country will create new wealth. Without a strategy to get the new wealth creating engine firing, Greece will be in crisis again within 18 months.
ReplyDeleteChile is a great success story of creating an economic environment in which new wealth is created...Chile and Brazil are the powerhouses in Latin America.
That's a great point to highlight and I totally agree. No miracle solution will happen only with the implementation of austerity measures, expenses cuts and tax reform. There is absolutely the need to build and, most important, implement a plan for economic growth otherwise that mission, which is already extremely tough, will not succeed and will only result in putting more money to postpone the inevitable default. Population should be committed and to do that, should understand the consequences of a default or of being out of Euro Zone, because numbers by themselves just don't reconcile with an external debt over 180% to GDP and the level of the bailouts being released, the default seems to be inevitable. Let's follow the Euro zone leaders meeting today to see the outcomes.
DeleteWith regarding to Latin America, Brazil and Chile are great countries to be considered!!!! I would add Mexico to our investment basket also.
Thanks for your excellent comments and keep in touch by subscribing to our site if you rather